Shares of Peloton fell $1.58, or 22.6 percent, Wednesday to an all-time low of $5.41 after the connected fitness equipment maker posted a wider-than-expected fiscal-fourth-quarter loss and pushed back its cash-flow positive goal to 2024 after it failed to achieve it this year as expected earlier.

Peloton cited higher marketing spend for the holiday season and costs associated with the recall of 2.2 million exercise bikes for failing to achieve its goal of break-even cash flow in the second half of fiscal 2023. Officials also said subscribers to its connected-fitness platforms would fall from end-of-year levels.

Peloton shares touched a record low of $5.05 earlier in the Wednesday session. Shares started the year at $7.94 and peaked during its pandemic-infused surge at $162.72 in December 2020.

The net loss in the quarter ended June 30 of $241.8 million, or 68 cents a share, narrowed from a loss of $1.26 billion, or $ 3.72, a year ago but was wider than Wall Street’s consensus estimate of a 38-cent loss per share.

Revenue was $642.1 million was in line with the midpoint of its $630 million to $650 million guidance range. Analysts’ consensus estimate had been $640 million.

Demand for its connected bikes, which had spiked during the pandemic, has seen a sharp revision post-pandemic as some people return to gyms, while many others cut back on discretionary spending amid high inflation.

Connected Fitness subscriptions were 2.97 billion in the quarter, up 4 percent year-over-year but down 1 percent versus the third quarter.

Peloton said it ended the year with a paid subscriber base of 3.078 million, just shy of its forecasts. But it added that the tally would fall between 2.95 million and 2.96 million over the three months ending in September due to a shift in consumer spending toward travel and experiences.

In a quarterly letter to shareholders, Barry McCarthy, CEO and president, said Peloton’s quarter-over-quarter decline was due to the seasonal slowdown in hardware sales and higher-than-anticipated subscription churn. The average net monthly churn was 1.4 percent in the quarter against 1.1 percent in the prior quarter and 1.4 percent in the year-ago quarter.

McCarthy said, “The slowdown exceeded our expectations through May and through the first three weeks of June as consumer spending shifted toward travel and experiences. Then, eight weeks ago, the trend reversed itself, and we began to see a reacceleration in hardware sales.”

On a call with analysts, McCarthy said he was unsure how sustainable the uptick was. He said, “I imagine there are some macro forces at play. There’s some seasonality at play. We don’t have enough insight into the cause and effect to give you a thoughtful answer. But the trend seems to be holding now.”

Growth also was slowed by the seat post-recall involving more than two million Peloton bikes announced on May 11. According to a recall notice from the Consumer Product Safety Commission, Peloton had received 35 reports of seat posts breaking and detaching from the original model of its bike during use. Peloton is offering replacements for the bike’s seat posts that are installable at home.

McCarthy said that to date, Peloton had received approximately 750 thousand requests for replacement seat posts, more than expected. Fulfilling the requests has faced challenges as supply chain constraints impacted seat post availability.

McCarthy said, “We’ve fulfilled over 340,000 of these requests and expect to fulfill the balance by the end of September, which is slower than members wanted but three months sooner than we had originally communicated to members. The cost of this recall substantially exceeded our initial expectations, leading to an additional accrual of $40 million this quarter for actual costs incurred and anticipated future recall-related expenses. In addition, an estimated 15 to 20 thousand of our 2.2 million impacted members elected to pause their monthly subscriptions in Q4 pending the receipt of a replacement seat post.”

McCarthy said Peloton made progress on his primary goal of stabilizing cash flow since he became CEO earlier this year. Peloton achieved positive free cash flow in the most recent quarter, excluding a DISH legal settlement and despite the impact of the seat post recall on Q4 sales revenue. Pro-forma free cash flow was $1 million, only positive on a pro-forma basis.

McCarthy said pro-forma positive cash flow was “not the goal we set for the business. Nevertheless, we achieved an important milestone in rightsizing the cost structure of the business. We don’t currently expect to remain free cash flow positive in the two upcoming quarters, mainly due to the seasonality of our hardware sales, timing of inventory payments, marketing spend as we invest for growth and prepare for the holiday season, and one-time cash outlay for seat posts; but we do expect to achieve this objective once again in the second half of FY24.”

McCarthy said he expected Peloton’s growth to benefit as it expands entry points into the Peloton brand by reducing prices on certain products, introducing its rental service, which now totals over 48 thousand subscribers and rolling out Peloton Certified Refurbished. He said, “According to our data, the rental business continues to represent a significant incremental growth opportunity, and we have just expanded bike rentals into Germany, a market we know embraces the rental model more than most.”

A relaunch of the Peloton brand on May 23 to better showcase Peloton’s value proposition and overall experience is already paying some benefits. He said, “We’re already seeing meaningful positive shifts in perception across a range of measures, including gains among Gen Z and consumers who are just beginning their fitness journeys. We are also seeing a mixed shift in downloads towards men, Gen Z, Black, and Hispanic customers.”

He added that Peloton had also shifted its advertising campaign to represent what its members “actually look like and how they live to showcase that Peloton is for anyone, anywhere, anytime. We know shifting consumer perception and behavior takes time, but we’re pleased with the progress we’ve already made.”

In the future, the company forecasted first-quarter revenue between $580 million and $600 million, below Refinitiv estimates of $655.9 million. At the mid-point of the range, sales are expected to be down 4.3 percent year-over-year from $616.5 million and off 8.1 percent sequentially from $642.1 in the 2023 fourth quarter.

Adjusted EBITDA is expected to show a loss of $20 million to $10 million in the first quarter compared to an adjusted EBITDA loss of $33.4 million in the year-ago quarter and $34.7 million in the prior quarter.

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